NC tax reform working for working families
Published April 16, 2014
by Art Pope, State Budget Director, April 15, 2014,
Tax reform is working for working families in North Carolina. Tax reform means lower sales taxes and income tax rates for everyone. Tax reform, as enacted by Gov. Pat McCrory and the General Assembly, means workers and their families keep more of their hard-earned dollars to spend or save as they choose, and employers keep more of their hard-earned dollars to reinvest to create more jobs and grow the economy.
Our tax code is now simpler, more uniform and fairer for everyone.
Tax reform began in 2011, when the General Assembly reduced the state sales tax rate by 17 percent, from a state rate of 5.75 percent to 4.75 percent. Tax reform continued in 2013, when McCrory and the legislature simplified the personal income tax – taking rates ranging from 6 percent to 7.75 percent to a single flat rate of 5.8 percent. They also passed a higher standard deduction starting in 2014 and a flat personal income tax rate of 5.75 percent in 2015.
As a result of lower personal income tax rates, a higher standard deduction and more accurate payroll withholding tables, most employees will see on average a 20 percent reduction in state taxes withheld from their paychecks. A large sample of over 75,000 state employees in all income ranges saw the average state tax withheld drop from 5.6 percent in 2013 to 4.5 percent in February and January. This is the equivalent to a 1.1 percent more in take-home pay.
Many North Carolina employers pay the “personal” income tax rate on their business income, but others pay “corporate” income taxes. To make North Carolina more competitive and provide more money for all employers to invest, tax reform also reduced the corporate tax rate from 6.9 percent to 6 percent in 2014. It will drop to 5 percent in 2015.
Predictably, North Carolina’s tax reform has been criticized for benefiting those who earn and save more of their income. That’s not favoritism; it’s basic math. Those who earn more and pay a higher tax rate will logically benefit more from a rate reduction than those who paid at a lower rate or who paid no income taxes at all.
Ironically, legislative Republicans have been criticized for essentially raising taxes by ending the state’s Earned Income Tax Credit. That’s inaccurate. The tax credit expired because the Democratic Party’s legislative majority put a sunset on it when it was enacted in 2007. The sunset of the state EITC is not a tax increase anyway because the credit was a transfer payment to those who were already receiving the federal EITC even when they did not owe any state income taxes. And for those who do not pay any income taxes, they will still benefit from the 17 percent lower state sales tax rate.
The truth is, everyone in North Carolina is benefiting from the tax reforms that began in 2011. Sales tax rates are lower, income tax rates are lower and the standard deduction is higher.
Look at your own paycheck. You’ll discover that the state is withholding fewer taxes, so your take home pay is higher. More importantly, there are tens of thousands of more North Carolinians earning paychecks today than there were in January 2013 when McCrory and his administration took office.
The next time you buy clothes for your children, look at the receipt to see how much sales tax is charged and think of what you saved compared with the old state sales tax rate. Think of the long-term benefit in an economy that is still recovering and of employers, both corporations and mom and pop partnerships, keeping a bit more of the money they earned – money that can by reinvested to create more jobs and grow the economy.
The evidence is clear. Tax reform is working, and nearly every North Carolinian is keeping more of the money earned, which is fundamental to building a stronger economy.
Art Pope is the state budget director and a former member of the N.C. House of Representatives.
April 16, 2014 at 10:08 am
James Barrett says:
A sure sign of a liar is using two different definitions of "cut" in the same article. Both the penny sales tax and the EITC were scheduled to be sunset, but he takes great credit for one while blaming someone else for the other.
GOP tax policies clearly hurt working families while disproportionately benefiting the rich. http://www.ncjustice.org/?q=budget-and-tax/prosperity-watch-issue-36-no-3-tax-shift-harms-working-families-ability-invest-strong
Not to mention Mr Pope convinced our Governor to reneg on his campaign promise that tax "reform" would be revenue neutral, thus we are not able to pay our teachers what we could have.
April 16, 2014 at 7:08 pm
Norm Kellly says:
Thank you Art for doing such a great job explaining this. Using facts & figures to explain a situation is always a good thing. Unless you are a lib. Cuz libs avoid facts. Libs almost always refer to facts as 'made up statistics to try to confuse enough people to pull the wool over their eyes.' In some way shape or form, libs always try to discredit a Republican/conservative for using facts. In the lib world, emotions reign; facts are non-existent.
Take James's response as a good example of that. The state sales tax was supposed to sunset? Again? And this was to be credited to the demon party? They put a sunset on it when they passed it? Really? I'm only amazed at this 'thought' because of the history of the demons in Raleigh and their implementing taxes with an automatic sunset built in. Historically, the demons in Raleigh would override the sunset and convert the end date into a new continuation date. I can't remember how many times they did that on sales taxes in the past 20 years or so. But it was often. It's almost a guarantee that if demons continued to rule Raleigh, they would have found a way to claim that the state couldn't afford for the sales tax sunset to become reality. The demons would have argued loudly, often, strongly, that the state just HAD to extend it. And the media types, like the N&D & Gary, would have been more than happy to carry the water for the demon leadership.
Since the EITC was a direct transfer of money from those who have to those who 'don't have', the demons would also have found a way to extend that as well. Otherwise, the demons, and their supporters, would claim that it was an unfair advantage for 'the rich' while unduly hurting 'the poor'. And the buffet slayer Barber would have been out proclaiming that allowing the EITC to sunset would be a racist thing to do.
As for any response that leveling the tax field disproportionately hurts the poor and benefits the rich, it's obvious that Art does an EXCELLENT job explaining this. But libs choose to ignore this information because it's a FACT and they are genetically incapable of recognizing and dealing with a FACT. When you don't pay taxes or you pay very little taxes, like those who are given the EITC, then when taxes are reduced, it's virtually impossible for it to impact you. But the point is even more outrageous. When the sales tax is raised, who does it hurt more: 'the rich' or 'the poor'? Who is more negatively affected by having more of their spending money taken from them? I know 'the rich' are the favorite 'whipping boys' for libs, but thinking has to happen amongst yous at some point. Take off your tin foil hats, let in some wavelengths with actual information to educate yourself. When the income tax is lowered FOR EVERYONE, doesn't this positively affect 'the poor' also? If not, could some lib please explain this to me? Why does an income tax cut NOT benefit 'the poor'? Does a rising tide NOT raise ALL boats?
As for paying our teachers, there's some obvious misinformation or lack of thought process involved with that statement. It's the DEMONCRAT party that CUT education spending! The FACTS are NOT on your side of this argument. When the sales tax was higher, when the income tax was higher, when the demons were putting us into debt by extending unemployment benefits beyond what we had money to cover, the DEMONS couldn't find a way to increase the education budget. Even after the holy grail of libs was forced on us by Gov Mike, we still couldn't increase the education budget to pay our teachers more. I'm referring to the state lottery being rammed down our throats. Gov Mike promised that it would cure virtually every ill in the state. And the demon leadership in Raleigh went along and forced it upon us in what could possibly be an unconstitutional vote. But even after a higher sales tax, a higher income tax, and a stupid state lottery, the demons STILL couldn't increase the education budget. But they went one step further in the wrong direction! The demons actually CUT the education budget. Worse than any right-wing nut case has done! They spoke pretty words to the teacher groups/organizations, then cut the education budget anyway. And for some reason, too many teachers are convinced that it's the Republicans that cut the education budget. Go figure. Too many tinfoil hats!
April 16, 2014 at 11:30 pm
James Barrett says:
Education budget was cut $459m in 2011, $479m in 2012, $117m last year, and $63m already projected for this year. If you don't think those are real, with real impacts, you're not just an ideologue, you're an idiot. Everybody understood cuts in 2009 because income was down and our budget has to balance. Now the GOP is giving tax cuts to the rich and continuing to bankrupt our future by destroying public education. I don't have the words for how absurd and morally reprehensible that is.
Read the #s on who is impacted and how by this tax "reform". The word disproportionate means that the rich are benefiting MUCH more than they should based on what they earn. You can lie all you want about how it *should* impact people, but the real #s are in the link I posted and they show what a raw deal this is for most of the people of NC.
